Douglas Keel,a financial analyst for Orange Industries,wishes to estimate the rate of return for two similar risk investments X and Y .Keel,s research indicates that the immediate past returns will act as reasonable estimates of future returns.A year earlier,investment X generated cash flow of $1,500 and investment Y generated cash flow of $6,800.The current market values of investments X and Y are $21,000 and $55,000, respectively.
a) calculate the expected rate of return on investment X and Y using the most recent year,s data.
b) assuming that the two investments are equally risky,which one should Keel recommend?. Why?
2007-06-21
03:41:21
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0 answers
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asked by
Ampofo A
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Investing